Investment managers and superannuation funds are increasingly voting contrary to the recommendations of their proxy advisers as the number of company boards receiving strikes is growing, according to a study.
Link Market Services’ AGM Snapshot, an annual report that analyses voting outcomes from some 400 Australian listed entities, ranging from S&P/ASX 20 companies to the All Ordinaries, showed 27 companies received strikes, up from 22 in 2017.
The 2018 AGM Snapshot also revealed a decline in the influence of proxy advisers, with investment managers only voting in line with their proxies 25.1 per cent of the time, and super funds following their advisers in just 42.7 per cent of resolutions.
Link Market Services CEO Lysa McKenna said the contentious AGM season demonstrated the importance of shareholder engagement.
“The increased scrutiny placed on board performance and corporate governance in the wake of the Royal Commission into the Banking and Financial Services sector has led to investors increasingly forming their own independent views on company remuneration and re-election resolutions,” she said.
“With just one-in-four investment managers and less than half of superannuation funds voting in line with their proxy advisor’s recommendations in 2018, it is clear companies need a strategy to ascertain and influence major shareholder voting intentions ahead of the 2019 AGM season, through direct engagement and services like proxy campaigns.”
Link also noted an increased focus on director elections, particularly where the entity was underperforming or there were broader governance or risk concerns.
“Historically, director elections and re-elections have been viewed by companies as non-events, often passed with almost unanimous support and few probing questions from shareholders,” Ms McKenna said.
“In the last few years, and especially in 2018, we’ve seen a big shift towards investors requesting directors address the AGM and explain why they should vote in favour of their election, and some companies are even pre-empting this by having each director up for election address the meeting ahead of the vote.”
A number of ASX-listed companies are utilising hybrid meeting technology to improve shareholder engagement, Link said.
The company noted Oz Minerals and Mirvac experienced increases in AGM attendance of 99 per cent and 188 per cent respectively after introducing the technology in 2018.
Ms McKenna anticipates the use of hybrid meeting technology will become more prevalent in the 2019 AGM season and beyond, which together with the consistent growth in online voting will continue to “democratise the process.”
“There was a 3.21 per cent increase in online voting in 2018 which is consistent with growth over the past decade,” she said.
“The highest usage rate of online voting technology is in the S&P/ASX 200 with almost half of all votes being lodged electronically, highlighting the utility and importance of the platform.
“After the spike in ‘against’ votes on director elections and remuneration reports in 2018, our key recommendation for the 2019 AGM season is that greater engagement with shareholders is needed throughout the year, particularly with technology making it easier than ever before for investors to voice their displeasure.”
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